13th Annual Gulf Petrochemicals & Chemicals Association Forum 2018

Your Excellencies, distinguished guests, ladies and gentlemen: good morning. It is a pleasure to be with you today at one of the chemical industry’s foremost conferences.

I would like to thank the GPCA for putting together yet another excellent program. This is an exciting time for our region’s petrochemicals and chemicals businesses, and the GPCA is to be commended for its advocacy and thought leadership in this vital sector, which I believe can be a key driver of our economies.

Ladies and gentlemen, as you are aware, Saudi Aramco is already the world’s leading upstream oil company.

We have an unmatched, lowest-cost oil reserve portfolio, a reputation for reliability, a competitive edge in creating and deploying advanced technologies, and exceptional resilience built over more than eighty years.

Our gas program is especially worth highlighting. The program will attract investments of about 150 billion dollars over the next decade, with production reaching 23 billion standard cubic feet a day from the current 14 billion.

We also have world-class unconventional gas resources that are rapidly supplementing our large conventional resources. Because a significant proportion of this unconventional gas is rich in both liquids and ethane, its production will play an important role in the further growth of the Kingdom’s chemicals sector.

Currently we have 16 drilling rigs concentrating on unconventional gas and more than 70 wells completed this year.

In addition, we have plans to create an integrated international gas business, which is backed by the vast conventional and unconventional domestic resources I just highlighted.

With our Upstream in such a strong position, one of Saudi Aramco’s key strategies is to create a Downstream portfolio that is its equal.

We have plans for substantial expansions in refining, marketing and lubes. Our ultimate target of 8-10 million barrels per day of integrated refining and marketing capacity will create a better balance between our upstream and downstream segments.

But an even more exciting part of our downstream strategy is our future chemicals business, which I believe will make us future-ready—as I will explain.

Chemicals alone will represent about one-third of the growth in world oil demand between now and 2030 and nearly half to 2050, ahead of trucks, aviation and shipping.

In absolute terms, petrochemicals will add nearly seven million barrels per day of oil demand by 2050, reaching a total of some 20 million barrels per day.

This will be driven by an expanding world population and an increasing number of people enjoying more affluent lifestyles.

If we look at a country like India, its current per capita consumption for major plastics is just 10 kilograms per year compared to South Korea and Canada, which approach 100 kilograms per capita.

So, there is a lot of room for chemicals growth in fast-growing developing countries.

Saudi Aramco will make the most of those prospects with global investments in the chemicals space of roughly 100 billion dollars over the next 10 years—in addition to prospective acquisitions.

We are expanding this business both in Saudi Arabia and in fast-growing overseas markets, with the aim of converting two to three million barrels per day of crude oil into petrochemicals.

That will provide a reliable destination for Saudi Aramco’s future oil production, and diversify both the company’s business portfolio and the Kingdom’s economy. It will also capture additional value, and help create thousands of meaningful new jobs.

Let me briefly highlight how we will achieve these goals. There are four key strategies that are receiving special attention.

First is the integration of petrochemicals with our expanding global refining and marketing system, with oil feedstock at the heart of this strategy.

We are targeting the conversion of up to 70 percent of the feedstock into petrochemicals. This challenging goal will be driven by advances in cutting edge technology, which leads me to the second strategy.

Our chemicals vision is supported by the development of groundbreaking crude oil-to-chemicals direct conversion technologies, where we are already seeing major progress in advanced thermal and catalytic cracking processes.

That work is being done not only in our own network of R&D centers, but also in partnership with other leading chemical and technology companies like SABIC, CB&I, Axens, and Chevron Lummus Global, as well as academic institutions like China’s Tsinghua University.

More broadly, technology will be one of the key enablers for us to build profitable and sustainable businesses.

By developing our own oil-centric chemicals technologies, we will enjoy a sustained competitive edge through our region’s large resource base of oil; capture additional value; and diversify our petrochemicals product slate, since heavier liquid feedstocks like oil offer a much wider product slate than those derived from lighter feedstocks.

The third strategy involves acquisitions. To reach our bold goal of converting two-to-three million barrels per day of oil into petrochemicals, both organic growth and strategic acquisitions are essential.

I am sure you have all heard about our current negotiations concerning the SABIC transaction, which fits our future vision for chemicals. SABIC is a world-class chemicals company and our strengths complement each other. Of course, we will continue to scan the horizon for other compelling opportunities for growth.

Fourth and last, our agenda extends beyond the core chemicals business itself into end-use applications of chemical products, so that we can help grow new industries.

That’s why we are giving special attention to developing and promoting cutting-edge non-metallic materials derived from petrochemicals.

I see great potential in non-metallic materials as a substitute for natural materials in a wide range of high growth industries. These include automotive, housing, construction, packaging, oil and gas, renewables, and others.

To move the needle, we have established a Non-Metallic Innovation Centre at Cambridge in the UK. It is developing non-metallic technologies for oil and gas field applications, with partners from academia, research centers, oil and gas companies, and composite materials manufacturers.

Further downstream, we aspire to usher in a new era of industrial diversification across the Kingdom, anchored by specialty chemicals and underpinned by small-to-medium enterprises producing high-value finished and semi-finished products.

In fact, our signature localization initiative, IKTVA, whose fourth anniversary we celebrated just yesterday, will also complement and support the downstream conversion sector by offering a reliable and efficient supply chain.

Early steps in downstream value addition involve Saudi Aramco’s collaboration with the Ministry of Energy, Industry & Mineral Resources and other entities to build value parks adjacent to petrochemical facilities.

This strategy will create opportunities for economic diversification and job creation, consistent with the aspirations of Saudi Vision 2030.

Our downstream strategy and its chemicals-focused components will enable progress toward multiple objectives, including strengthening the future position of oil and adding greater economic value.

In addition to diversifying our business portfolio, it will also make Saudi Aramco more robust and resilient, and deliver results regardless of market volatility.

Looking more broadly, I’m convinced that the Gulf’s chemical industry can become one of the key drivers of industrialization, value addition and job creation in the region.

With the region’s immense hydrocarbon resources, we ought to be leading global players in petrochemicals manufacturing, their conversion, and enabling new industries.

The Gulf unfortunately missed out on the early specialties cycle. But we cannot afford to let the forthcoming cycle pass us by now.

The tremendous growth in chemicals demand provides us with a fantastic window of opportunity—but such windows by their very nature offer maximum benefit only to those who act quickly. Also, those opportunities will not fall into our hands; instead, we must actively pursue them.

Ladies and gentlemen, by focusing on the oil feedstock and being creators of technology rather than simply consumers, we have an opportunity to shape a brighter tomorrow by acting today.

That requires compelling visions, sound strategies, the creation and implementation of breakthrough technologies, the cultivation of top-tier talent, effective execution, and above all delivery of results.

That is the collective challenge for our sector, so let us make the most of the opportunities before us.

Thank you for your attention this morning, and I wish you a productive Forum.